Baltic index index rises, coal buying slower

The Baltic Exchange's main sea freight index , which tracks rates to ship dry commodities, turned positive on Thursday helped by light iron ore cargo business

to China on the larger capsizes vessels.Analysts and brokers said mounting fleet growth and slower imports of coal and iron ore due to high stocks were capping potential for gains.
The overall index rose 0.57 percent or 8 points to 1,414 points after having fallen for four sessions previously. It has declined over 20 percent this year.
The outlook for dry bulk rates has been grim because ship supply has outpaced demand to ship commodities.
"Iron ore stocks in China are very high now and at a record and demand seems to be going through a temporary slowdown as they are curtailing electricity consumption which is quite unexpected," said Nigel Prentis, head of research, consulting & advisory with HSBC.
"Chinese (coal) imports are slowing down a bit and they prefer to use domestic production plus power rationing."
China is facing its worst power shortages in years. Weak spot demand for coal across Asia has left some traders with cargoes they are struggling to sell and prompted at least one major player to consider using capesize ships as coal floating storage.
The situation has been compounded by the deployment of a vessel owned by top iron ore producer Vale of Brazil, the first of the world's largest dry bulkers, known as very large ore carriers (VLOCs) to enter the fleet.
There were also expectations that India's monsoon would reduce iron ore exports as rivers rise, hampering goods transportation.
The Baltic's capesize index rose 2.47 percent, with average daily earnings edging higher to $10,933. Capesizes typically haul 150,000 tonne cargoes such as iron ore and coal.
Wells Fargo said cheaper capesize rates were boosting coal cargo trade in Asia and Europe.
"While we believe the superior capesize economics will likely continue to incentivise owners over the near-term, we believe rates will likely remain range bound near breakeven levels due to the sheer volume of available tonnage," it said in a note.
The Baltic's panamax index fell 1.32 percent, with average daily earnings at $14,385. Earnings for panamaxes, which usually transport 60,000-70,000 tonne cargoes of coal or grains, have more than halved since the same period last year.
The index has more than halved in the past six months, nearing levels last seen during the financial crisis in 2008.
"The rate of scrapping, particularly the bigger ships, has increased dramatically. But the pace of deliveries has been probably higher than expected," HSBC's Prentis said. "The oversupply issue is certainly not going away."
Source:Reuters